Renault Charges Ahead With Ampere’s Electric-Car IPO Amid Doubts
Renault RNO 0.37%increase; green up pointing triangle is moving ahead with publicly listing Ampere, its electric-car unit, but some analysts think an IPO could be the wrong road forward.
The French automaker is setting Ampere up to become Europe’s top electric-vehicle producer by making cheaper cars than its rivals to attract more consumers than just the early EV adopters, according to Chief Executive Luca de Meo, who is also the head of Renault.
An IPO, scheduled for spring 2024, would help with focus and accountability that a company embedded inside Renault can’t offer, he said during a call with reporters earlier this month.
While analysts generally agree that Renault is right to separate the EV business from the 124-year-old car maker, they have questioned the decision for an IPO at a time of uncertainty around demand and pricing, and for a business that Renault said is fully funded.
Renault, which said it will own a “strong majority” in Ampere, risks diluting the share value for current investors, said Bernstein analyst Daniel Roeska. He said the move puts Renault’s long-term worth at stake. The car maker currently has a market cap of 10.3 billion euros ($11.28 billion).
“They’re cutting out terminal value in Renault, and they’re selling it in Ampere,” said Roeska. “And why would a Renault investor want to give up terminal value?”
Though De Meo said he is still open to alternatives, he and Renault CFO Thierry Pieton also said an IPO is the best way to raise money to accelerate growth and profitability and that it creates the conditions to eventually reward Renault shareholders.
“For our group stakeholders, raising cash at the Ampere level provides the best way to accelerate its development, and ultimately cash generation, without pulling on group resources,” Pieton said at Ampere’s capital markets meeting.
Slashing production costs is key to Ampere’s strategy, which includes offering a small car for EUR20,000 and putting electric-car prices on par with traditional ones by 2027 or 2028. It will rely heavily on local and joint-venture suppliers, including for batteries, which will cost half as much as today as technology advances, Ampere said. EV-specific software and manufacturing platforms will also streamline costs with fewer necessary parts and less energy.
“I think that the projects are more down to earth than avant-garde,” Stifel analyst Pierre-Yves Quemener said.
The analyst is convinced of the company’s strength, if not the IPO’s. He said the company’s roadmap for affordable EVs led him to believe that negative sentiments toward the IPO amount to a scarecrow.
“It’s going to be a minor dilution that you will have to live with as a Renault investor,” Quemener said. “But once that asset is on the market, if it’s on the market for public trading, you would be keen to invest in that asset if you believe in the road map of Ampere. And I think the group has been very convincing.”
Ampere plans to sell 300,000 cars by 2025—the same year it aims to break even—and around 1 million by 2031 with a profit margin in the double digits. Renault finished 2022 with an operating margin of 5.6% while mass-market competitors Stellantis and Volkswagen posted margins of 13% and 8.1%, respectively.
However, publicly listed electric-car makers aiming to garner Tesla’s success have had problems. Polestar, the Volvo Car electric-car spinoff, was valued at $20 billion at the time of its IPO last year but now has a market cap of close to $4.50 billion after missing production targets. U.S.-based Rivian has struggled to keep production up and costs down. It was trading at $78 a share two years ago after its IPO and is now trading at around $17.
Additionally, electric-vehicle adoption in the EU looks slower than it previously did, in part because of high costs, according to a report published by Citi earlier this month. Still, they said that new model launches, cheaper and better battery technology and improved charging infrastructure will drive growth. Ampere has seven models slated for release by 2031.
IPO or not, De Meo said EV adoption will continue because of EU policies against gas-burning cars. EVs accounted for 14% of new EU car sales in October, up from 12% a year ago, according to the European Automobile Manufacturers’ Association.
“You can be skeptical,” De Meo said. “I’m not skeptical. As I said before, the future is for people that are brave enough and optimistic about building the things. And my job is to defend the European industry and to make sure the European industry can be competitive locally.”
The CEO has estimated Ampere’s value at between EUR8 billion and EUR10 billion, while UBS analysts have pegged it between EUR3 billion and EUR4 billion, saying in a research note that Ampere’s valuation is derived from a timeline of 2025 to 2030, which offers too little visibility.
Ultimately, Ampere won’t list on the stock market at any price, CFO Pieton said.
“We’re preparing ourselves for an IPO in the first half of 2024, but will proceed only if we’re comfortable that the market will sustain the right valuation,” he said.